nature, scope, significance and production process

1. AGRICULTURAL PRODUCTION ECONOMICS-
NATURE
SCOPE
SIGNIFICANCE
AGRICULTURAL PRODUCTION PROCESS
Lecture 1

2.  Agricultural production economics is a field of specialization
within the subject of agricultural economics. It is concerned with
the choice of production patterns and resource use in order to
maximize the objective function of farmers, their families, the
society or the nation within a framework of limited resources.
 Production economics is concerned with two broad categories of
decisions in the production process.
 1. How to organize resources in order to maximize the production
of a single commodity? i.e, Choice making among various
alternative ways of using resources.
 2. What combination of different commodities to produce?

3. Goals of Production Economics
1. To provide guidance to individual farmers in using their resources
most efficiently.
2. To facilitate the most efficient use of resources from the stand
point of economy
 Definition: Agricultural Production Economics is an applied
field of science wherein the principles of choice are applied to
the use of capital, labour, land and management resources in the
farming industry

4. BASIC PRODUCTION PROBLEMS
The producer or manager is faced with five basic production
problems on which they have to make decisions.
1. WHAT TO PRODUCE? This problem involves selecting the
combination of crops and livestock enterprises to be produced.
Should the business produce only crops, only livestock or some
combination? Which crop or rotations? Which livestock? The
farmer must select from among many alternatives that
combination which will maximize profits.
2. HOW TO PRODUCE? Many agricultural products can be
produced in a number of ways. Crops can be produced with more
capital and less labour (capital intensive technology) or more
labour and less capital (labour intensive technology). A manager
must select the appropriate combination of inputs which will
minimize the cost of producing a given quantity of some
commodity.

5. 3.HOW MUCH TO PRODUCE? The level of production and profit
will be determined by the input levels selected. A manager is faced
with the problems of how much fertilizer and irrigation water to
use, seed rates, feeding levels, labour and machinery use etc.
4. WHEN TO BUY AND SELL? The seasonality of supply
conditions in factor and product market results in variations in the
prices. The manager must consider these things in determining
when to sell or buy.
5. WHERE TO BUY AND SELL? Farmers generally purchase a
number of inputs for a production. Attempt is always to purchase
at the least cost. The producer must decide whether to sell in the
village market or in the regulated market or other alternative
market.

6. OBJECTIVES
The main objectives of Agricultural production economics are:
1. To determine and define the conditions which provide for optimum
use of resources.
2. To determine the extent to which the existing use of resources
deviates from the optimum use.
3. To analyze the factors or forces which are responsible for the
existing production pattern and resource use and
4. To explain means and methods for changing existing use of
resources to the optimum level.

7. SUBJECT MATTER
 With a view to optimizing the use of farm resources on an
individual farm level and to rationalize the use of resources from a
national angle, production economics involves analysis of
relationships and principles of rational decisions.
 Production Economics is concerned with productivity i.e use and
incomes from productive inputs (land, labour, capital and
management). As a study of resource productivity, it deals with
a) Resource use efficiency
b) Resource combination
c) Resource allocation
d) Resource management
e) Resource administration

8. AGRICULTURE PRODUCTION FUNCTION
 Mathematical relationship between input and output gives
agricultural production function
Input output
Production
process